Which of the Following Statements About Floating-Rate Preferred Stock Is

question 5

Multiple Choice

Which of the following statements about floating-rate preferred stock is correct?

• A)its dividends increase as interest rates increase.
• B)its market price increases at a set rate annually.
• C)it is the only stock issued without a par value.
• D)its dividends are deductible for tax purposes by the paying corporation.

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Definitions:

Goodwill Method

An accounting method used to evaluate the excess of purchase price over the fair value of net identifiable assets acquired in a business combination.

Journal Entries

Recorded transactions in the accounting records of a business that are used to transfer amounts from one account to another, ensuring the ledger remains in balance.

Fair Value

Fair value is an estimate of the market value of an asset, based on its current price in a fair and open market transaction.

Bonus Method

A method in accounting for partnerships where a new partner's investment is recorded at an amount that is different from the stated value of the partnership's net assets, affecting the capital accounts of the existing partners.